A humble, calm attitude that leads a trader to determine that he will patiently acquire and retain profits.
When you take on an attitude of confidence, you set yourself up to win. You believe that the market is bigger than you, that it’s not going to go down in the first round – but if you stay with it, you’re going to at least get some great punches in. When you’re confident, you believe that there is a respectable amount of profit available to you on every trade, and that you simply have to wait for the opportunity to come to you.
Plan on going the distance against the market. This means that you’re willing to spend some time in front of the computer. That you’re willing to keep a trading journal, even though it requires time and effort. That you visit the local bookstore or library and read everything you can about technical and fundamental analysis. That you wake up early. That you learn to acquire more discipline. That once you enter a trade, you’re willing to go the distance with it, but (unlike Rocky) you’re not willing to bleed to death just to prove a point.
When you have confidence, the following things happen:
A confident trader never does anything that would risk losing more than 10% of his account. It’s ok to lose on a trade. It is never ok to lose more than 5%-10% of your account on a single trade or set of trades that are open simultaneously. Ever.
Decide right now that you are never going to do anything to risk losing a substantial amount of your account. Period. There is no excuse for this. Your trading account is precious. It represents the amount of money that will bring you financial freedom. Never risk losing it. It is not money to be spent “learning how to trade.”
Never risk real money on stupid trades. If you ever do anything to lose your entire account, from this time forward, you are just an idiot. You have no excuse for it. It upsets me that many people that I have met have lost a substantial amount of their trading capital right as they figure out how to trade profitably. A confident trader saves his account for the time when he will know best what trades to take.
A confident trader never trades on emotion. You just know when to trade and when not to trade. Impulse trades will kill you. If you find that you are sitting down a the computer, and you are about to take a trade only because the market is moving and you do not want to miss the move, then you MUST walk away. This is when you need to shut off the computer. A confident trader doesn’t need a quick fix just to try to score some fast gains. A confident trader understands that an impulse trade is like lowering his hands in a boxing match – he is going to get punched in the face. When you take an impulse trade, you have no plan. And when you have no plan, but a trade is open, it’s nearly impossible to objectively figure out what you need to do next. Decide right now that you are never again going to open an impulse trade, period. Decide now that if you do open an impulse trade that you:
1. Will do 100 push ups, unless you are medically unable.
2. Will do 100 practice trades on historical charts before you trade again.
A confident trader never brags about his abilities. This is the precursor to becoming arrogant. It’s ok to make jokes about how you are going to bully the market into submission. It’s ok to tell yourself that you are going to do better next week than you did this week. But it is much more important to buckle down and do your planning and homework so that you are actually ready to do better next week. Most traders say that they are going to do better, but then they go watch “CSI” or “Desperate Houswives” or “Press Your Luck.”
A confident trader pulls the trigger on the trades she plans. Make the decision now that every day you are going to set aside time for trade planning. I do this every evening, for at least two hours, between 3pm and 12 midnight Eastern Time. You have to plan first. Even if you are a short term trader, using the 5 or 15 minute charts, you need to make sure that you make a division between your planning time and your trading time.
I have found that some of the best traders I have ever worked with struggle with pulling the trigger, with taking their own trades. This is hard for anyone who wants to protect their account. But here is the key: get yourself a trading partner, and announce to that person the trades you are going to take. This person will hold you to your plans. Your trading partner will be there to ask you if you followed through on your plans to trade. If you did not follow through on your plans to trade, we go back to square one:
If you do not follow through on your plan to trade a setup, then you must go back in time on historical charts, and trade forward candle by candle, for at least 25 trades.
A confident trader practices trading. What I just described above is called “manual backtesting” and it is one of the best confidence boosters you can do. By playing candles forward one at a time, you are showing yourself that you know how to trade. You are practicing without risking any real money. If you are not doing this right now, then start. If your charting platform does not allow you to play candles forward one at a time, then you need to switch to a new charting package. You need to do at least 50 practice trades per week. Keep a notebook with the results.
A confident trader understands her relationship with money. What do most people do if they find € 20 on the street in Paris? They spend it. Often people treat “found money” as if it were meaningless. My mother used to tell me that money must be burning a hole in my pocket, because I wanted to spend it so fast. Unless you solve your relationship problems with money first, you are not going to be a confident trader.
You have to learn to be an accumulater of money. This means that your goal is to amass a huge pile of money in your regular bank account, not just your trading account. It means that when you have a profitable trade, that you set some of that money aside. It means that every time your trading account grows, you raise the high watermark on your account and do not allow yourself to lose what you have gained.
A confident trader never believes that she has figured out the market. This is a nice way to lose your life’s savings.
Read More : THE ROLE OF CONFIDENCE
